Log in/Register

Please log in or register to continue. Registration is free and requires only your email address.

Log in

Register

Emailrequired

PasswordrequiredRemember me?

Please enter your email address and click on the reset-password button. You'll receive an email shortly with a link to create a new password. If you have trouble finding this email, please check your spam folder.

To continue reading, please log in or enter your email address.

To access our archive, please log in or register now and read two articles from our archive every month for free. For unlimited access to our archive, as well as to the unrivaled analysis of PS On Point, subscribe now.

Christopher Smart is a senior fellow at the Carnegie Endowment for International Peace and the Mossavar-Rahmani Center for Business at Harvard University’s Kennedy School of Government. He was a special assistant to the US president for International Economics, Trade, and Investment (2013-2015) and Deputy Assistant Secretary of the Treasury for Europe and Eurasia (2009-13).

Christopher Smart is looking for an "investment primer" for the UK after leaving the EU. He points out that of the $2.9 trillion the US invested in the EU last year, Britain received $600 billion of the total. This has much to do with Britain's access to Europe's single market. Foreign investors - mostly English speakers - were keen on using the UK as a springboard into the continent .
Indeed, Britain had benefited enormously since it joined the European Economic Community in 1973, with London becoming one of the world's financial centres in the course of decades. The Brexit vote of June 23 now hangs like a Sword of Damocles over Britain's future, affecting its investment environment. After going through a list of businesses that will bear the brunt of losing access to the single market, Smart says "it’s hard to find any sector where the balance for fresh investment tips toward Britain."
It comes as no surprise that plans for future investments in the UK are put on hold, as investors still don't know the outcome of the government's negotiations with the EU. The bone of contention is access to the single market at the expense of the "right to control immigration - a deciding factor" for the "Leave" vote. Apart from the single market, options like free trade area and customs union are also under scrutiny. Although Norway and Switzerland, as non EU-members have trade agreements with the EU, Britain will have to forge its own deal.
As the Brexit vote took most people by surprise, Smart sees no change in "manufacturers’ investment calculus....in the near term," because they had made decisions years ago on building plants and setting up "supply-chain infrastructure," and hiring "educated workforce." They have no choice but to move on. In the long term they would have to rethink their expansion strategy should UK-based manufacturers face "cumbersome new rules for exports to the rest of Europe." As manufacturing in the UK has been on the decline since the second half of the last century, this sector does not contribute most to Britain's economy.
There will be a decline in confidence in the small business sector, with people in small and medium-sized businesses being pessimistic about the future. Unfortunately "services are not fully covered by the EU’s single market, because national governments have retained the right to issue licenses for architects, doctors, and other credentialed professions."
The financial businesses, with the City of London generating 22% of the country's GDP and almost as much tax as the next 37 largest cities combined, despite accounting for only 12.5% of the UK population - according to the Centre for Economic and Business Research - make a net contribution to the Exchequer of some £34bn. The City of London is "the largest agglomeration of financial expertise in Europe – if not the world." This sector is worried whether banks would retain their "passporting privileges" after Brexit. These rights currently allow them to trade across the EU without the need for individual country licences. Even if London will retain its current position as a global financial services centre, many see some parts of their businesses being moved out of London into European headquarters - in Amsterdam, Paris, or Frankfurt - if no passporting agreement be reached.
Smart sees huge disadvantage for sectors that benefit from EU grants for startups, or research and development, dealing a blow to recipients from "world-renowned universities" in Britain. Another reality is that those businesses that might have to leave Britain are innovative ones in high tech, pharmaceutical and health care sectors. They fear they wouldn't be able to sell the new products at competitive prices from the UK. This could also create a brain-drain of scientists, engineers and financial experts etc, leaving a gap that other taxpayers have to fill. Those who had voted to leave the EU, are left behind to grapple with the struggling economy.

Can't agree with you doom laden forecast. In the end the Brexit vote highlights truths Europe is refusing to acknowledge. That Europe is declining as a share of world trade, that it is laden with huge debt and finance problems, that the instability of the Euro is a massive risk for future investors and the reluctance of Germany to underwrite a currency which cannot properly operate under the financial structures currently in place puts Europe not the UK in the worst position vis a vis foreign investment.

As part of a comprehensive deal with Europe the UK will argue strongly that British funds have been invested in the EU for 40 years, that British Military assets have protected the EU and that we have Geographical sea rights which can easily be placed into the pot when negotiating a custom made deal for the UK. The UK owes Europe nothing, we have paid our dues and earned the right for special treatment - period. The UK is not like any other country as you yourself admit. If the EU want to take their ball away and sulk then Europe will become the poorer. The UK don't forget flagged up issues that were presenting us with a problem; over population; welfare tourism; and infrastructure pressures created by large scale transfers of populations from countries like those from eastern and southern Europe. The EU were either unable or unwilling (I favour the latter explanation) to re-visit their "free movement" policies because for the vast majority of the failing economies of the EU inward migration is not an issue. Unfortunately for the UK it is an issue and one the EU refused to address because it serves failing EU economies to ship their unemployed elsewhere rather than deal with the difficult issues of fiscal failure.

The UK is not going to accept any lectures, bullying, brow beating deals from the EU and any suggestion that we will crumble under the weight of the inertia that is the EU will not happen, the memories of the second world war are already forgotten, the British are at their best with their backs against the wall - we fight for principles in every sense of the word. Britain is a sensible, well educated rational country, probably more sensible and rational then most of the nations clamouring for the UK's blood because it has the temerity to stand up and say the EU is being misled by people who have little experience of the real world and see trade through the warped prism of a left wing protectionist agenda.

Britain is not scared of the unknown, we are a brave nation taking an educated gamble that the world will look at our thousand years of history and the brave decisions we have made for ourselves and others and consider that the balance of probability is that the British population have the calculation right - that British global reach can compensate for EU protectionism, and that our laws, flexibility, education and growing strength in hi tech when stacked against the grant dependant; Euro crumbling; debt laden; growth stunted; welfare draining; failed left wing policies of Europe pose existential threats to the very future of Europe - the UK stands alone in pointing to a different direction for her people, a direction the EU is scared to follow because it would require massive structural change; harsh realities and austerity and few in Europe are prepared to tell the Europeans how it must be if they are to survive. The British understand the problems and have been changing their economy and balancing their budgets and working hard to be match fit for global trade. It is just a pity the EU don't come to their senses and work with the UK to recast Europe into a market and a model that values subsidiarity and junks the ridiculous "one size fits all" approach to policy. Truth is it is unable to accept it is wrong and until the EU recognise serious change is now needed and allows difference no one will be moving forward. Perhaps the UK can make Europe see sense and come to the negotiating table as friends and partners who want Europe to work, the UK has been very patient for very long, after 40 years food is NOT cheaper; economies are not growing, migration is weighing heavily and failing economies have few incentives to improve especially when they can export their failure (unemployed) elsewhere - the model is wrong and needs fixing, the UK is just pointing out the obvious we should be praised not punished for that!